RESOURCES

Overcoming Fear to Thrive in the Current Downward Economic Cycle

Part 2 (November 2008)

Living through and Surviving a “Financial Meltdown”

Imagine yourself six months from now. You’re at a party with many of your friends. What’s the mood? While none of us has a crystal ball to predict the future, it is my opinion that the mood could be generally as negative as it is today, perhaps even more negative (in other words, most people may not be very happy).

Many of your friends may be complaining about how the terrible economy has hit them hard. Some will have lost their jobs; several will have had their investment portfolios and/or retirement accounts reduced significantly; most will have seen the value of their homes reduced considerably (some to lower than their mortgage balance); and several will be experiencing expenses too high for their current lifestyle. They will certainly be living with a certain amount of fear - maybe even a large amount of fear – which could paralyze them even further and make them less able to deal with the situation.

My question to you is … will you be one of those scared, complaining, “paralyzed” people?

I will be achieving my purpose in life if you are able to answer that question with a solid ‘no’. But that is only possible if you, first, eliminate or at least minimize any sense of fear you may have right now (see my “Overcoming Fear” – Part 1 article if you haven’t read it yet) AND second, if you create and follow a well-designed plan to make sure you not only survive the current economic climate, but actually thrive in it.

Yes, you could be at that party six months from now complaining in fear along with those friends of yours, or you can be there sympathizing with them, but toasting to your happy, prosperous life, filled with security and abundance - if you do the right things – and do them now! There is no time to wait. You must take action now.

NOTE: This article – which is Part 2 of my “Overcoming Fear” financial series – will focus on the basics required to make it through these difficult economic times without significant financial loss and pain (in other words, a “survival plan”). By this I mean simply getting through the next 12-24 months without losing your home or wiping out your retirement accounts. Part 3 of this series, which I plan to put out at the end of December (during the week between Christmas and New Years), will be about actually thriving in this economy – not just surviving it (it’s more of a “wealth-building plan”). By this I mean actually being better off financially – perhaps MUCH better off – than you are today. Yes, many people will get wealthy during this economic “meltdown” we are experiencing. Shouldn’t you and I be among them? We can be, you know!

This will surely reduce or eliminate our fear and help us BeHappy!

The remainder of this Part 2 article puts forth some fundamental ideas which can help create the basic plan for you and your family, so you are as prepared as possible for whatever happens in the economy over the next year or so …

Designing Your Basic (“Survival”) Plan

With the U.S. Presidential election finally over, we may experience some optimism for the next 6 to 12 months which may help move things toward the positive financial scenario (although we haven’t seen it yet – especially in the stock market or in housing). If that does happen, it will make your preparation plan a bit easier to implement. And, hopefully a positive turn in the economy becomes sustainable and permanent, but don’t get fooled by a temporary “honeymoon” period. If you read some of the predictions, including the ones by a guy named Harry Dent (www.hsdent.org) - who has accurately predicted much of what we’re experiencing right now - we can’t be too sure about the next few years economically. In fact, Dent’s new book – due out this January – is about the “Great Depression” which he believes is about to occur here in the United States from 2010 to 2012. He bases his predictions on solid demographic and economic data, along with concrete historical trends, so it shouldn’t be ignored. You might want to get a copy of the book once it’s released in January. I know I will be reading it as soon as it’s out. I want to be prepared for anything and everything. If he is right – and we have a plan – we will be ready. If he is wrong – and we have that same plan – we will just be that much better off. It’s a no-lose situation – if we have a plan and are well prepared.

What to Do:

Here, therefore, are 5 basic things you must do right away to be best prepared for whatever happens economically over the next couple of years:

1. Build a detailed “Spending Plan”: The first action to take to create your basic plan is to sit down right now – at least within the next 48 hours - and put together a detailed summary of what you need to meet your basic financial needs.

The more detailed you can get here the better. If you already have a “Spending Plan” (which most people call a budget) – that’s great. If not, make one now. Google has a great "Budget Template" at: http://spreadsheets.google.com/ccc?key=p9R24K-6xIl38cBGPRnzyZw which includes a ready-made expense organizer and calculator to help you get clear perspective on your financial obligations. This is where you should start. Know where you are right now so you can plan accordingly.

Once you have a clear idea of where you stand financially, and have built your basic Spending Plan, the next thing to do, regardless of your current financial status, is to…

2. Reduce your expenses IMMEDIATELY,: This may be obvious, but many people either just won’t try since it means having to sacrifice, will do it too late, or just plain ignore it - believing the current economic situation will end soon enough and everything will be “great” again before we know it. Maybe that’s true – and I, for one, sure hope so - but what if it isn’t? Wouldn’t it be better to expect the positive scenario and be prepared for the negative one?

One of the fundamental concepts to understand if the negative economic scenario unfolds as Harry Dent predicts is that “cash is king”. So everything that can be done should be done to preserve or raise cash. From an expense perspective, for the next 6-12 months, that means you must do whatever possible to reduce your personal expenses (and your business expenses if you own a business) as part of the design of your plan. This could mean making some temporary sacrifices, but it will be well worth it if things go in the negative direction over the next year or two.

From my perspective it’s time to really get aggressive in this area - again, regardless of your current financial situation. Because as a very savvy, wealthy, financial “insider” friend of mine put it to me recently, it’s time for all of us to “hunker down”.

Yes, it’s possible that the “rules of the game” are being re-written and those who have “hunkered down” in this economic cycle will be in a much better position to manage the potential financial decline we could experience over the next few years. And, if you are in a pretty good financial position right now – with extra cash and low debt – this hunkering down is what could help make you even wealthier (which will be discussed in Part 3 of this series).

Specific Expense-Reduction Strategies

Once you have your basic Spending Plan together, you can start to find ways to cut expenses (there are always some). Click here to read an article I found which provides many simple ways to reduce expenses.

As an example, one suggestion is to reduce your monthly recurring obligations, like cable TV, phone, and internet. I just did that recently simply by calling the company providing these services for us in our area in Tampa (Brighthouse Networks). We had been paying $170 per month for basic cable, high-speed internet and digital telephone. I was able to reduce my bill by $50 per month just by making a couple of phone calls to Brighthouse and negotiating a lower payment. When I first called, they lowered my monthly cost for these services by about $20 (from $170 to $150 per month). But I called back and became a bit more aggressive because I knew a competitor (Verizon) was offering an even lower price – and they lowered it even more (down to $129 per month). Plus, they gave me a free month of service (which reduced my monthly average cost to $119) and a free year of two different movie channels (we had no movie or premium channels previously).

Some additional ideas not mentioned in that article I referred you to above are things like exercising or working out at home rather than at a health club, and temporarily eliminating – or reducing the frequency of - your lawn or pool-cleaning services if you have them.

Doing these things – and others - can save you several hundred dollars per month, which could add up to several thousand dollars per year in savings. This can come in very handy if the economy stays depressed for a prolonged period.

If you can, here are a few more “major” things some people can do to reduce expenses, at least temporarily:

- Refinance your mortgage to reduce monthly payments
- Negotiate a lower credit card debt payment (there are many credit card debt reduction services available)
- If you’re renting, get a less expensive place for the time being
- Postpone that planned vacation (or make it a less expensive one)

Finally, if you want to get lots more information on this topic of expense reduction, you can go to: http://frugalliving.about.com/ which is a comprehensive website all about managing expenses, creating a spending plan, etc.

Once you have a Spending Plan and have begun to reduce your monthly expenses, for those who have any meaningful debt obligations, you must…

3. Eliminate or at least reduce your debt: Although I mentioned this as it relates to credit cards above in the expense-reduction section, it is important enough, and broad enough, to be a stand-alone part of your plan, especially if it’s a problem for you.

Debt can create significant fear and financial pressure for any of us. So reducing debt is a tangible way to “overcome fear”, particularly in this economy.

This, I realize, is a tough one for many people – especially at this time of year as the holidays approach (please also see my Holiday Happiness series, which is a bit more specific on many issues related to getting through the holidays more easily and painlessly).

The first thing which you MUST DO in order to get through these tough economic times is to manage your debt. Do not, however, cut up your credit cards as many financial consultants suggest, unless this is the only way you can keep from over-spending. Because, again, reducing your expenses is the highest priority and you must do whatever it takes to get your expenses down right now. But, if you have the self-control, your credit cards could come in handy if you are able to start implementing the next step of the plan (the “success plan”) which will come in Part 3 of this series. They are also nice to have for true emergency situations if they arise.

How much debt do you have? What items in your Spending Plan make up your debt obligations? What percentage of your monthly expenses goes to debt payments?

These are all questions you must answer for yourself. And if the answers indicate you have a problem in this area, you must address it now. If you don’t, and the economy doesn’t improve as we’d all like it to, you could be caught in a dangerous downward financial spiral.

Use the many resources available if necessary. You can google “debt reduction” or “debt reduction services” to get plenty of sources to choose from in helping to reduce your debt. This could be very important to your financial picture over the next couple of years, so don’t ignore it.

A Spending Plan, expense reduction, debt management – with these three basics covered, now it’s time to include a strategy to…

4. Augment/increase your income: As soon as some people read that, they think, “yeah right” – how am I supposed to do that? I admit, it may not be easy, but nothing is impossible, as I always say. In fact, right now, with the economy so depressed, there are many opportunities to make additional income. Read my article called Multiple Streams of Income for some great ideas.

This subject will be explored in more detail when we advance to the topic of how to actually generate wealth in this economy. For now, I'll just mention briefly a couple of ways, outside your current job or area of expertise where you can bring in more income.

One very effective and relatively easy extra-income generator, for example, is Network Marketing. This is one strategy that many people consider as “not possible” or just plain “wrong”. Those are likely the people who’ll be at the party I mentioned at the beginning of this article complaining about how bad things are six months or a year from now. And certainly, Network Marketing is not for everyone. But I do believe everybody should at least consider it – at least for some extra income to help make it through this financial crisis. Once you’ve considered it seriously, if it’s not right for you then try another strategy. All I know is that network marketing works (there are many people making six and seven figure incomes doing it – many of them on a part-time basis). And it's long-term residual income. I also know it is a legitimate business – especially if you’re with the right company. It’s like any other business. There are good ones and bad ones. Take healthcare - a business I know well as a physician. Most would consider it a legitimate business, right? Well there are certainly those doctors, dentists, and chiropractors who are fraudulent and lack integrity, just like with any other business. It’s the same with Network Marketing. Hook up with a solid, long-term company, and you can generate a six-figure income working less than 20 hours per week. And if you want just a couple thousand extra dollars a month, it takes even less of a time commitment. My wife and I are involved in what we believe to be the premier network marketing company in the world – MarketAmerica (www.marketamerica.com). It’s an internet marketing brokerage company. And since people will have to keep buying goods and services (although likely at a lower pace over the next couple of years) and since MarketAmerica brokers over 30,000,000 products and services, it will continue to generate income throughout any economic conditions. Also, unlike most network marketing companies, the pay plan is not based on a “pyramid” type plan, where only the people at “the top” of the pyramid make any real money. With MarketAmerica, anyone – even people at “the bottom” of the organization - can make as much or more money as the people at “the top”. It is truly unique. If you need more information on the credibility of network marketing, look up Paul Zane Pilzer. He is one of the leading economic experts in the U.S. and he believes that Network Marketing is the distribution wave of the future. His book, The Next Millionaires is a bestseller, and is largely about how Network Marketing will make millionaires out of many people over the next decade.

There will be much more about this in future financial articles, but for now, click on the text in the box to the right to go to my MarketAmerica web portal to see for yourself what it's all about. THEN, Contact me using the "Contact Us" button (the bottom button at the top left of this page) to get involved.

If Network Marketing is not for you, get a part-time job if necessary. My father used to work three jobs to make ends meet. I respected him tremendously for that. I’m sorry he had to do it, but it wasn’t a matter of choice, it was a matter of necessity. He simply could not support our family of six on his regular full-time pharmacist salary of $30,000 per year back then. So he worked in a second drug store at night (from 6:00 – 10:00 pm, right after his 8-to-5 shift was over at the first pharmacy). He didn’t get home until about 10:30 every night. My mother would let him wake us up a couple nights a week so we could see him and so he could spend some time with us. Then, on weekends, he’d work at another drug store. Every other week, he’d have a Sunday off. On those days off, we had a great time with him, creating memories that were priceless (see the Raising Happy Kids section of this website to learn more on how these “moments” can make a big difference). Now I’m not suggesting you work three jobs – unless you must. Remember, it’s time for whatever it takes. And it may even be difficult right now to find that extra job (which is partly why the Network Marketing strategy above is so attractive). But there is extra work to be had. You just need to be creative, committed, and persistent. Find something you can do, and then do it. Just a few extra dollars a month could make a difference – especially when combined with the expense reduction part of your plan.

Another idea for extra income is to become an “infopreneur”: Again, go to my article on Multiple Streams of Income for more information on this strategy. As with other strategies, it’s not for everyone. It takes time, effort, and persistence, but it can work for those who (a) have the motivation, (b) have - or are able to get - the knowledge (the information), (c) take action, and (d) are persistent.

Basically an Infopreneur is a person who distributes information (like I’m doing right here). As with Network Marketing, it can be done full-time or part time, with the income derived from it based partly on the amount of time and effort devoted to it. Also like Network Marketing, it takes time to ramp up. You can’t usually start today and get paid immediately (like you can with a job). So, if this is a strategy you want to pursue, you must start immediately so that by this time next year you can be generating income.

Finally, as part of your cash-raising effort, look at things like: calling in any loans you may have out to friends or family and selling some of your non-essential personal or business assets (Ebay or Craig’s List are great sources for this).

The bottom line, once again, is that “cash is king” for the next year or more. So, if the current economic conditions persist or worsen, your plan must include a cash preservation strategy. And…

5. If you already have some cash, you must protect it and have it work better for you: What I’m talking about here is using your cash to generate additional cash. If you have your cash in the bank, for example, it may be good to move it somewhere else to (a) better protect it and (b) make it work more for you. We just did this recently and it makes a difference. Not only are we less “afraid” of losing our cash, but we also are making much more “interest” on our money than when we had it in a bank.

If your money is in the stock market or in a mutual fund, you may want to get it out – even though it may seem to be too late.

You should consult a financial planner or advisor before you do either of these two things, though; which is what we did. It can get extremely complicated and may be more risky if you don’t know what you are doing.

All this stuff can help build a basic plan that will allow most people to “survive” the current financial situation we are experiencing – however long it lasts.

As the title of this series states, the goal of this whole economic issue is to eliminate FEAR from your life so that you can be happy.

By (1) designing a basic plan to best manage your financial situation and be prepared for whatever happens over the next couple of years as we go through the current (late 2008) “financial meltdown” – and (2) implementing that plan right away – I am confident you will not only reduce or eliminate the fear you may be feeling right now, but you can also get through this economic cycle with less pain, and maybe even be better off than you were before.

So start designing your plan now. Part 3, published on December 31st 2008 is about actually creating wealth during the current economic situation. Click here to go to Part 3 now.

Also, be sure to subscribe to The BeHappy! Newsletter if you haven’t already. It contains lots of useful information on how to increase joy and happiness in your life, regardless of life’s challenges (like the economy).